Data from the World Economic Forum reveals that economic and societal challenges, including economic downturns, inflation, and diminishing social cohesion, are considered the most significant risks in G20 nations over the next two years. This conclusion comes from the Executive Opinion Survey (EOS), which polled over 11,000 business leaders across more than 110 countries from April to August 2023.
Before the latest conflict in the Middle East, the survey highlighted a growing concern among business leaders in G20 countries regarding the interconnection of economic and societal risks. These concerns are set against a backdrop of rising global political tensions and sustained inflationary pressures in numerous major economies.
Ahead of COP28, the survey found that an economic downturn is the primary concern for business leaders in the G20, cited as the top risk in 13 of these countries. Other significant risks include inflation, labour and talent shortages, energy supply constraints, and the erosion of social cohesion and wellbeing.
Despite the occurrence of record-breaking global temperatures and severe weather events in the past year, environmental risks have been somewhat overshadowed by these other concerns in the 2023 survey results. Environmental issues, such as extreme weather events and the failure to adapt to climate change, were mentioned only eight times among the top five risks in G20 countries. Technological risks, like those associated with artificial intelligence, also appeared less frequently, being cited just three times in the top five risks.
The survey's findings indicate a notable similarity in the concerns of advanced and emerging economies. “Economic downturn” emerged as the most significant risk across all regions. Additionally, “extreme weather events” is the sole environmental risk to appear in the top 10 this year for countries categorised as high income, upper middle income, lower middle income, and low income.
“Short-term risks such as economic and labour market-related ones dominate the global agenda today,” said Peter Giger, chief risk officer for Zurich Group. “It is important for companies to respond to these challenges keeping a balanced perspective on short and longer-term risks. Businesses may feel they have little control over existential threats such as climate change. However, it is critical for companies to explore ways to mitigate these risks while at the same time responding to the immediate challenges.”
WEF’s report earlier this year shed light on the rapidly changing and complex nature of global risks, highlighting a growing sense of uncertainty. According to the survey, over 80% of respondents anticipate ongoing volatility for the next two years, marked by various shocks leading to divergent outcomes.
The survey, which gauges perceptions on global risks, suggests that the journey towards 2025 is expected to be heavily influenced by social and environmental risks, shaped by underlying geopolitical and economic factors. A difference in risk prioritisation between government and business respondents was noted.
Government participants are more focused on risks such as debt crises, challenges in stabilising price trajectories, and failures in both mitigating and adapting to climate change. On the other hand, business leaders are more concerned with widespread cybercrime, cyber insecurity, and large-scale environmental damage.
The most pressing global risks predicted to emerge over the next two years, within the context of current and ongoing crises, include the cost-of-living crisis, an economic downturn, geoeconomic warfare, a pause in climate action, and increased societal polarisation. Each section of the report delves into the current trends linked to these risks, their underlying causes, and potential emerging implications and cascading effects.
The report also highlighted emerging risks related to inflation, debt, and rising interest rates. Presently, governments and central banks, particularly in developed markets such as the United States, Eurozone, and the United Kingdom, are faced with the challenge of balancing inflation management against the risks of triggering a severe recession. Additionally, they are tasked with shielding citizens from escalating living costs while managing historically high levels of debt.
Public sector participants in the Global Risks Perception Survey (GRPS) identified “Debt crises,” “Failure to stabilise price trajectories,” and “Prolonged economic downturn” among the top ten risks for the next two years. These concerns are not isolated to any single region but are prevalent worldwide.
In the EOS, “Rapid and/or sustained inflation” emerged as a top-five risk over the next two years in 89 countries surveyed, marking a notable increase from 2021. In several G20 countries, including Brazil, South Korea, and Mexico, inflation is considered the primary threat. Both developed and developing economies have felt the impact of inflationary pressures.
Countries like Argentina and Türkiye have seen inflation rates soar above 80%, while Zimbabwe, the Bolivarian Republic of Venezuela, Lebanon, the Syrian Arab Republic, and Sudan experienced triple-digit inflation. In June of the previous year, inflation in the United States peaked above 9%, and record highs were recorded in the United Kingdom and Eurozone in October, reaching 11.1% and 10.6%, respectively. These rising inflation rates have led to higher interest rates, further impacting emerging economies.
“Acute economic and societal risks continue to worry G20 business leaders in the near term,” said Carolina Klint, chief commercial officer at Marsh McLennan Europe. “While rightly addressing these immediate concerns, they should also remain mindful that, by overlooking significant technological risks, they could leave their organizations vulnerable to increasingly sophisticated cyber and AI-related threats which may profoundly affect their prosperity and the communities in which they are based.”
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